HEALTHCARE REFORM – ONE YEAR LATER Steve Markesich, CPAM Yale-New Haven Health System Maryland Chapter AI September 15, 2011.

HEALTHCARE REFORM – ONE YEAR LATER

Steve Markesich, CPAMYale-New Haven Health SystemMaryland Chapter AI September 15, 2011

TODAY’S OUTLINE

A quick summary Updates on the law itself What the house is up to What has gone on in the courts Other issues impacting the legislation Questions and answers

Summarizing where we left off in December

The good, the bad, and the ugly

IMPACT ON INDIVIDUALS – The Good No pre-existing condition exclusions for Children

under 19. No unjustified rescissions of coverage. No lifetime limits on coverage. Restricting annual limits on coverage. Remove insurance-company barriers to ED services. Relief for the Part D doughnut hole. Free preventive care under Medicare and new

plans. Help for early retirees.

Individuals, cont. Extend coverage for young people up to 26th

birthday though patents insurance. Immediate help for the uninsured with pre-existing

conditions (interim high-risk pool). Prohibition of pre-existing clause Ban on higher premiums for women Cap on out of pocket expenses for private health

plans. New long-term care insurance program (CLASS) Greater access to insurance.

IMPACT ON INDIVIDUALS – The Bad Tax on indoor tanning services. Higher taxes on wealthiest Americans. Higher deduction limit for unreimbursed medical

expenses. PCP shortage? Reduces HSA exemptions – potentially eliminates

FSAs and HSAs? Shift from EGHPs to State Exchange plans? Unfunded mandates? Healthy Americans who don’t use services or buy

insurance now required to.

Individuals, cont. Does access to care ultimately get rationed? Does employer mandate lead to job cuts? More government involvement in Health Care. Short-term increases for EGHP cost share? Expansion of MCR/MCD = more cost shifting? Rebirth of HMOs? Does this ultimately lead to higher costs for

individual who engage in high-risk lifestyles? Smokers Diabetics Overweight/obese

Impact on employers - The Good Help covering cost for their retirees Tax credits for small business Companies with < 100 employees can purchase

insurance from Small Business Options Program Exchange

Subsidies for self-employed Small businesses no longer at a competitive

disadvantage Save money by paying the fine for not offering

EHPGs to employees? Wellness program incentives

Impact on Employers – The Bad Not providing coverage no longer an option

without financial penalties. Short term uncertainty in the insurance market

leads to significant short term premium increases.

Uncertainty about what this ultimately will do to the bottom line.

Nothing in legislation to promote HSAs. Penalties for larger businesses Need to report HC benefits on W-2s in 2011 1099 requirement dropped

The McKinsey Survey In June, the international consulting firm

McKinsey and Company threw itself into the nasty partisan debate by publishing research that appeared to predict that may employers would dump their EGHPs when in 2014.

They noted that paying the penalty would cost many firms, particularly large companies, less than providing coverage.

More McKinsey The Obama administration immediately

slammed the report, and Senate Democrats demanded they release the proprietary methodology behind it.

Most surveys internal and external to the Administration prior to this report were generally consistent in their results that this would not be an issue.

McKinsey When the released the methodology, it

came with a statement that the survey “captured the attitudes of employers and provided an understanding of the factors that could influence decision-making related to employee health benefits.”

“We understand how the language in the article could lead the reader to think the research was a prediction, but it is not.”

Reform Implementation

Medicaid – Will be expanded significantly

Medicaid – Already on the books

Creates a state option to cover childless adults through a Medicaid State Plan Amendment.

Creates a state option to provide Medicaid coverage for family planning services to certain low-income individuals.

Creates a new option for states to pick up CHIP coverage to children of state employees eligible for health benefits if certain conditions are met.

Medicaid expansion 2011 - Create a new state plan option allowing MCD

enrollees with certain conditions to designate a provider as a health home – provides states taking up this option with 90% federal matching funds for 2 years.

Create a State Balancing Incentive Program in MCD to provide enhanced federal matching payments to increase non-institutionally based long term care service (2011).

Establish the Community First Choice Option in MCD to provide community-based attendant support services to certain people with disabilities (2011).

Provide a 1% increase in the FMAP (federal matching funds) for states that provide Medicaid coverage (and remove cost-sharing) for preventive services and immunizations (2011).

Medicaid – 2011 & 2012 Prohibit federal payments to states for Medicaid

services related to health care acquired conditions (2011).

Provide MCD payments to institutions of mental disease for adult enrollees who require stabilization of an emergency condition (effective 10/1/11 – 12/31/15).

Create new demonstration projects to pay bundled payments for episodes of care that include hospitalizations (effective 1/1/12 through 12/31/16)

Make global capitated payments to safety net hospital systems (effective FY 10-12)

Medicaid 2013 & 2014

Increase Medicaid payments provided by PCPs for 2013 and 2014 with 100% federal funding.

Reduce states’ Medicaid DSH allotments (2014).

Medicaid Expansion Expand Medicaid to all non-Medicare

eligible individuals under age 65 with incomes up to 133% FPL based on modified adjusted gross income and provides enhanced federal matching for these individuals (2014).

This has created a massive loophole that would give relatively well off early retirees benefits that are supposed to go to poor people

Medicaid Expansion – Oops! This is because under the law social

security benefits would no longer be counted as income.

Of course, the White House says this was an unintended error, and that the administration would be looking for a fix.

This begs the question of how many other problems like this exist, and are they being rooted out.

Impact on Providers Less uninsured and more insured patients but also more

Medicaid – higher co-pays and deductibles? ED overcrowding becomes worse with PCP shortage? Significant reductions in DSH/ changes in cost reporting? Bundled payments across providers? Uniform transaction sets to become a reality? Electronic medical records – regional/national data

warehouses ($19B in budget) Rebirth of HMOs – Death of Medicare Managed Care? More integrated health systems? The bottom line is that a large part of the cost of this

program will come from hospitals getting paid less.

Summary on provider impact The legislation hopes to reduce wasteful spending –

eventually hospitals and doctors will be paid based on quality and value.

Privately owned physician practices will become like dinosaurs. In order to thrive in this environment physicians will have to merge into larger groups to make it easier to adopt management practices to evaluate their care, and conduct internal quality reviews. Either that or simply become hospital employees.

The law includes incentives for hospitals to shift business away from traditional acute care inpatient facilities into more cost-effective settings.

Impact on Providers - Medicare

Medicare cuts are going to be a reality.

The Independent Payment Advisory Board will charged with monitoring the outcome of the Medicare changes in this legislation and will fast-track recommendations to reduce Medicare spending if spending exceeds targets.

Provider impact – preventable readmissions

Beginning in 2012, HHS will publish each hospital’s readmission track record.

In 2012, MCR will stop paying hospitals for preventable readmissions tied to health conditions such as heart failure or pneumonia.

Will expand in 2014 to cover four additional health conditions.

Provider impact – Medical Harm Tied to Healthcare Acquired Conditions stemming from

medical errors or infections. In 2012 hospitals will no longer be paid for just

reporting their performance, but will be paid commensurate to their scores.

Higher scoring hospitals will be paid more. In 2015, HHS will start reporting each hospital’s record

for medical errors and infections pertaining to M/C pts. In 2015, MCR will reduce its payments by 1% to

hospitals with the highest rate of medical errors and infections, and MCD will no longer pay for treatment when a patient is harmed during a hospital stay.

Provider impact - penalties

Not only will hospitals potentially lose real $$$ at a time when they are struggling to keep up with escalating costs, but be vulnerable to an even bigger risk – a tainted reputation.

Will private insurers follow Medicare’s lead?

More on Physicians

Reimbursement levels PCPs will increase while specialists rates are unchanged (PCP care emphasized)

The exception is for surgeons who practice in a designated health care shortage area

Sets target levels for per Capita Medicare spending in 2015 – these targets may be hard to reach.

What has occurred since December?

Legislative changes, clarifications, the courts and politics

2012 - Accountable Care Organizations Provides incentives for doctors to join

together in “Accountable Care Organizations” that can coordinate care.

Networks of doctors and hospitals would coordinate patient care and earn bonuses if they save Medicare money and meet quality targets.

This concept was written broadly, and CMS must flesh out many issues, like how are Medicare patients placed, how the caliber of care is judged and how will bonuses be awarded.

ACO Goals

Better care for individuals Better health for populations Slower growth in costs through

improvements in care

Recent ACO Proposed Rules Physicians in group practices, networks of

individual practices, hospitals that employ physicians, partnerships among these groups or other healthcare providers, and any other Medicare providers and supplier as deemed by HHS can lead an ACO.

Each ACO must include healthcare providers, suppliers and Medicare beneficiaries on its governing board.

Physicians who are part of an ACO have to notify their patients, and patients are not locked into staying with an ACO.

Two ACO models ACOs can elect to assume a smaller amount

of shared savings but have no risk of losing Medicare reimbursement for two years. In year 3 they would be penalized for not meeting certain benchmarks.

The other model would allow organizations to reap larger benefits the first two years but would be penalized for falling short on certain measures.

CMS would develop the benchmarks to measure performance and assess how or if a group receives savings or a penalty.

More on ACOs Doctors, hospitals and insurers are already

at odds as they urge the feds to set rules protecting their financial interests.

Hospitals and doctors want to avoid being financially responsible for patients who go outside an ACO for care, and don’t want to be penalized if they miss savings targets.

Insurers meanwhile are afraid that ACOs will try to make up lost revenue by charging privately insured patients more or coaxing them to get more treatments.

They want CMS to put a tight rein on ACOs.

Barriers that need to be addressed

Capital requirements to fund an ACO Required changes to a individual

physician’s practices Existing antitrust rules Conflicting federal policies

Bundled payments

Medicare establishes a national pilot program in which doctors, hospitals and other providers are paid a flat rate by Medicare for each patient “episode of care” (MCD in 2012)

This is what is known so far Spans integrated care from 3 days prior to

acute care episode thru 30 days post discharge Pre-admission outpatient, inpatient stay, post

acute services – OP, rehab SNF, etc.

Payment for all services in one payment Set group of medical conditions Managing entity to administer payment and

facilitate reporting.

Still needs to be defined:

Clinical conditions to be included Care coordination process Structure for distributing payments

Republican campaign promises: Republican congressional candidates

declared war on the legislation, called for its repeal and promised to work toward that end.

What can they try to do? Repeal it (not likely) Defund it Delay it Oversight it to death Dismantle it Put in as bad a light as possible All of the above

The Republican House

What have they done so far?

Malpractice $50M will be given to states in the original

legislation to help them implement programs that will provide an alternative to the traditional tort litigation process of the courts.

The House Judiciary Committee approved H.R 5 along party lines in February (faces uphill battle in Senate).

This bill would cap non-economic compensatory damages at $250K, establish a statute of limitations for filing medical malpractice suits, and limit attorney fees in health care lawsuits.

The first salvo In January, the House voted 245-189 to

approve a Republican bill designed to scrap the entire legislation.

Republicans voted unanimously for the bill and were joined by 3 Democrats.

Realistically, this was done for symbolic reasons. The Senate blocked the measure and it also had no chance of overriding a Presidential veto.

Funding Update

In February the House voted to block money to implement the legislation by a new party-line vote.

It certainly will not pass in the Senate

Legislative maneuvers The House Energy and Commerce

Committee approved H.R. 1213, which would cut off federal funds to state-based insurance exchanges.

The committee also backed H.R. 1214, which revokes grants for school-based health centers, and H.R 1215 which revokes $230M for teaching health centers.

Legislative maneuvers The House passed H.R 1217 on April 13th to repeal the law’s

prevention and public health fund, which would grant authority to the HHS secretary to administer $17.75B in funding from 2012 to 2021 (not expected to pass the in the Senate).

On April 14th the House and Senate both passed the final continuing resolution to fund the government through the rest of the fiscal year, which cut funding for healthcare programs, repealed the law’s free-choice voucher program, and rescinded the start-up funds for the Co-op plan.

The budget deal also strikes a provision that allowed some workers to forego their employer’s health coverage and opt instead for a contribution to buy insurance on the own in the state exchanges.

It also eliminated additional funding to hire more IRS agents.

Maneuvers, cont. These actions are not devastating blows to

the legislation, but they do highlight areas that have just enough flaws to be vulnerable.

Proponents of the law claim that while the funding battle did “touch” healthcare reform it was in the most gentlest of ways and in areas the White House was not fully invested in.

Rhetoric is already hot Some Democrats have accused House

Republicans of foul play. Rep. Earl Blumenauer (D-OR): “Sometimes

legislative hearings are long and boring. Sometimes they are excruciating. Yet rarely are they embarrassing. (April 1st)… marked a first in terms of a blatant effort at intimidation and retribution against AARP for having the temerity to support healthcare reform.”

The States Many Republican governors back lawsuits

against the legislation, and threaten to return the money budgeted for it.

The White House has made it clear however that, absent state action, the onus lies on the federal government to implement the law.

How? There is a wily feature of the law’s legislative language, which says that if states don’t comply with the law the Feds will do it for them.

The White House’s view: “States have the first crack at it,” explained one

administration official. “States are empowered to take the lead on things,

that’s what we wanted…But at the same time we aren’t going to allow someone not to get important consumer protections just because he has the misfortune of living in a state that doesn’t like the law.”

The threat of federal intervention is the most motivating card the administration can play, and it is felt most acutely with respect to the state-based insurance exchanges.

A giant game of Chicken? Len Nichols – HC policy expert with

George Mason University: “Are you confident you can beat

Obama in 2012? If you say ‘I don’t want to do reform and I bet I can beat him,’ and you lose, then Kathleen Sebelius will set your exchange. Who wants that? No one. Not even Massachusetts.”

States, cont. Even Republican governors more or

less agree. “We cannot let the insurance

exchange default to federal control, so we are moving forward with the planning that is required to make the exchange work best for Ohio,” Rob Nichols, press secretary for the newly-elected governor.

2012 Elections Many key Republicans (most worried about

re-election) have made comments on the law.

Senator Hatch (R-UT) was asked whether he thought the nation’s healthcare system needed serious reforms.

He called the federal law a “dumb-ass program” that will not solve the problem.

Senator Hatch is getting threatened by the Tea Party as not being “conservative” enough.

It wasn’t always that way The Republican opposition to healthcare reform is

more about politics than policy. It wasn't that long ago that the individual mandate

wasn't controversial among Republicans. Sen. Charles Grassley (R-IA) said not too long ago that the mandate enjoyed bipartisan support.

In the 1990s, Republicans proposed health care reform that included an individual mandate, and it was co-sponsored by Grassley and Sens. Orrin Hatch, Bob Bennett and Kit Bond -- all Republicans.

Newt Gingrich historically been in favor of the individual mandate until he declared his candidacy for the Republican presidential nomination.

Waivers The Obama administration has granted more than

1,000 waivers to companies and states, exempting them from some requirements of the legislation.

Critics say this is proof that the law is unworkable – Republicans allege this is to minimize complaints.

Proponents say that all this proves is that it is more difficult to a series of reforms slowly instead of implementing them all at once, and that the bulk of the legislation should have occurred much sooner than 2014.

Regardless, the waivers suggest that full implementation of the legislation may not occur now until 2017.

The Ryan BudgetProposal – a study in hypocrisy?

House Budget Committee Chair Paul Ryan’s (R-WI) health guru was saying last fall that Medicare actuaries determined that 15% of hospitals will be driven out of business in 10 years or less if proposed Medicare cuts go through, and called the cuts “clearly unworkable.”

These same cuts are in the Path to Prosperity budget Rep. Ryan recently proposed.

Hypocrisy House Majority leader Cantor (R-VA)

said that the act would “cut Medicare for our seniors and increase premiums for many Virginians.”

In Ryan’s budget, Medicare beneficiaries will go from paying 25-30% of Medicare costs to 70%, which does the same thing Cantor complained about.

Hypocrisy, cont. When the tax on expensive employer-provided

insurance plans were pushed back to 2018, conservatives were outraged.

Rep. Ryan’s Medicare voucherization begins in 2022.

Many conservative questions if anyone could rely on the numbers the CBO comes out with. Now they are touting the CBO’s estimate of Ryan’s savings.

Democrats have been equally hypocritical about other things and probably will be in opposition to Ryan’s plan.

So what is the message here? – Don’t let the other party win.

Supreme Court Punts on Fast-Track review

On April 18th the Court did not act on a request from Virginia AG Ken Cuccinelli (R) to petitioned the court to skip the appeals process and take up the case as soon as possible.

NJ Judge Dismisses Suit On April 21 a New Jersey Federal

judge dismissed a pro se challenge to the constitutionality of health care reform.

This suit had claimed, among other things, that the law is illegal because it was passed by someone who is not eligible to be president of the United States.

Federal Appeals Court Supports Law on May 9th

Three judges in the Richmond-based 4th Circuit Court of Appeals expressed strong support for the law. This was the first appellate hearing on the law’s constitutionality.

All three judges, who were selected randomly to hear the case, were appointed by Democratic presidents.

The panel heard two cases – one filed by the Commonwealth of Virginia and the other by Liberty University.

Legal Scorecard

Obama 3 – Republicans 2 So far, courts who ruled in favor of the

law were appointed by Democratic Presidents and those against the law by Republican presidents. This does not include the many cases that have been thrown out of court – in the law’s favor.

At this time, the balance of the courts have ruled the law constitutional.

Surprise?

The judges who ruled in favor of the legislation were appointed by Democratic Presidents.

The judges who ruled against the legislation were appointed by Republican Presidents

Supreme Court If the Supreme Court hears this case a

ruling could possibly come before the 2012 Presidential election.

The Court may also sit on a decision until after the election.

The President is asking for the process to play out, thinking that by the time the case will be heard most of the law will be implemented, more of the nation will benefit from it (and not want it changed) and it will be too costly to repeal.

House Dems call for Justice Thomas to recuse himself 74 members of Congress called on Justice

Thomas to remove himself from hearing any cases that have to do with health care reform.

This followed revelations that Thomas’ wife received nearly $700K from the Heritage Foundation between 2003 and 2007, and that income was not disclosed on his financial disclosure forms as required by law.

Virginia Thomas recently started a lobbying firm, and The Heritage Foundation opposes health care reform.

Issues impacting pace and scope of change

The economy Double dip recession Jobs

Medicare solvency Debt International issue 2012 elections

So what happens now? 2012 campaign takes center stage Fate of House, Senate and White

House Lots of rhetoric – little change Maybe some tweaking More specifics (good and bad) may

come to light Nothing significant until Supreme

Court hears case and/or elections

THANK YOU I am certainly going to

continue to follow this drama if there is anything worth sharing will certainly let you know.